SME lending in 2026: what the latest data means for brokers

The SME lending market has shifted a lot in 2026. Rates went up four times, more businesses are turning to non-bank lenders, loan demand is rising, and credit stress is building at the same time. For brokers, that mix means more deals to place, but less room for error on each one. This guide pulls the latest data into one place and turns it into practical steps for working deals in the current market.

Rates are higher, and may stay that way

On 30 September 2026 the Reserve Bank raised the cash rate by 25 basis points to 4.60 per cent. It was the fourth increase of 2026, taking the total rise this year to 100 basis points. The RBA pointed to elevated inflation and said it would act further "if needed" (CommBank).

For SME borrowers, higher rates flow through to repayments and to how lenders test serviceability. A deal that serviced comfortably at the start of the year may now be tighter, even if nothing about the business has changed.

SMEs are moving to non-bank lenders

ScotPac's latest SME Growth Index found that 61 per cent of SMEs planning to invest in the next six months intend to use non-bank lenders. That is a record, and the first time the measure has passed 60 per cent. Only 31 per cent plan to use bank lending, unchanged from six months earlier and well below the 48 per cent peak in 2023 (Financial Newswire).

For brokers, more non-bank options means more ways to get a deal done, but also more policy to keep track of. Each lender sets its own limits on time in business, turnover, credit, industry and existing debt. We explain how those layers work in How SME lenders assess a deal, and the basics of the non-bank market in Non-bank business lending in Australia.

Demand is up, but it's defensive

Businesses are still borrowing. Non-bank lender Banjo Loans reported its best quarter since it began reporting in 2023, with applications up 27 per cent and loans drawn up 31 per cent in the September 2026 quarter compared with the previous quarter. Equifax reported business loan demand rising across all five sectors it tracks, while mortgage demand fell 19.2 per cent year on year in September (Broker Daily).

The type of borrowing tells the story. Valiant Finance's analysis of about 10,000 commercial settlements in FY26 found (Australian Broker):

• average unsecured working capital loans rose 20 per cent to $58,000

• average revolving facility size rose 35 per cent to $82,000

• settled term loans rose 13 per cent, while revolving facility volumes fell 18 per cent

• settlement rates for borrowers with credit scores below 459 rose 18 per cent

In plain terms, many SMEs are borrowing to manage cash flow rather than to expand. Expect more working capital and cash flow conversations, and more clients with less-than-perfect credit. If you're weighing a revolving facility for a client, see Business line of credit vs overdraft.

Credit stress is building

While demand rises, the signs of strain are getting stronger. CreditorWatch's September 2026 Business Risk Index found (CreditorWatch):

• 10.1 per cent of B2B invoices were more than 60 days overdue, up from 5.0 per cent a year earlier and the highest level since April 2018

• only 48 per cent of invoices were paid by their due date, down from 58 per cent

• trade payment defaults were up 26.1 per cent year on year

• 37,577 ATO tax debt defaults were in effect, up 20.7 per cent year on year

Business-related personal insolvencies also rose 14.4 per cent in FY2025–26 to 4,046 cases (Broker Daily).

The pressure isn't spread evenly. Share of invoices more than 60 days overdue in September 2026, by industry (CreditorWatch):

• Food and beverage services: 19 per cent (up from 10 per cent)

• Construction: 13 per cent (up from 6 per cent)

• Utilities: 13 per cent (up from 7 per cent)

• Transport, postal and warehousing: 12 per cent (up from 4 per cent)

• Retail trade: 11 per cent (up from 5 per cent)

• Health care and social assistance: 7 per cent, the lowest

Industry appetite is one of the most common reasons a lender says no. When an industry's arrears climb, some lenders tighten policy for it, so check current appetite before you submit.

The rise in ATO tax debt defaults matters too. Reported tax debt can show up on a client's credit file and affects how lenders view the deal. We cover this in detail in ATO debt and business loans.

Why deals are falling over

Banjo Loans' barometer for the June 2026 quarter gives a useful view of what goes wrong (The Adviser):

• The most common reason for a decline was serviceability, followed by failing minimum eligibility criteria, then adverse credit.

• There was a sharp rise in businesses choosing not to proceed after conditional approval, and more switching lenders at the final stage.

Two of those three decline reasons, minimum eligibility and adverse credit, can usually be spotted before a deal is submitted. Matching the deal to the right lender's policy up front is the easiest way to protect approval rates and your relationship with the BDM.

What brokers can do now

1. Test serviceability at today's rates. Rebuild the numbers on any deal you scoped earlier in the year. Use recent bank statements, not last year's financials alone.

2. Check credit and ATO status first. Pull the credit file and ask about any ATO debt and payment plan before you approach a lender. Surprises at assessment are the fastest way to a decline.

3. Confirm industry appetite. Hospitality, construction, transport and retail are under the most pressure. Check each lender's current policy for your client's industry rather than relying on what was true six months ago.

4. Match to minimum eligibility before you submit. Time in business, turnover, credit and loan size limits are hard lines. Shortlist only the lenders whose policy the deal clearly fits.

5. Look at existing debt. Lenders are alert to businesses carrying several facilities at once. Get a full picture of current borrowing and repayments.

6. Keep the client engaged after conditional approval. With more businesses walking away late, set clear expectations on fees, repayments and conditions early, and keep the timeline tight.

7. Have a plan B. Know your second and third lender options before you submit, so a decline doesn't stall the deal.

Questions clients often ask

Will rates go up again? Nobody knows for sure. The RBA has said it will raise rates further if needed, so it's wise to plan repayments with some buffer.

Why is a non-bank lender willing to help when my bank isn't? Non-banks often have different credit policies, including lending unsecured or assessing cash flow from bank statements. That flexibility usually comes at a higher cost, so compare the full terms.

My customers are paying me late. Will that affect my application? It can. Lenders look at cash flow and bank statements, so slow-paying debtors may show up as tighter cash flow. A working capital facility or invoice finance may be worth discussing.

The short version

• The cash rate is 4.60 per cent after four rises in 2026, and the RBA hasn't ruled out more.

• A record 61 per cent of investing SMEs plan to use non-bank lenders.

• Business loan demand is rising, driven mostly by working capital and cash flow needs.

• Late payments, trade defaults and ATO tax debt defaults are all climbing, especially in hospitality, construction, transport and retail.

• Most declines come from serviceability, eligibility and credit. Matching the deal to lender policy before you submit is the best defence.

Sources

• CommBank: RBA raises official cash rate to 4.60% (September 2026)

• Financial Newswire: Major banks cede further ground in SME lending (ScotPac SME Growth Index)

• Broker Daily: Businesses are struggling, but demand for finance keeps rising

• Australian Broker: Non-bank lenders fill the gap as banks tighten business credit

• CreditorWatch: Business Risk Index, September 2026

• The Adviser: SMEs adopt defensive posture amid rising costs

This article is general information only. It isn't legal, financial or credit advice and doesn't take into account anyone's circumstances. Figures are drawn from the sources listed and reflect conditions at the time of writing. Lender policies change, so always confirm details with the lender. Visro does not provide credit assistance or financial advice.